The latest student loan forgiveness laws have made long-term tax and financial planning immensely important. Since the amount of the monthly student loan payments, under several different repayment programs, are based on the college graduate’s tax information, we highly recommend a tax plan written up to lower both the taxes and the monthly payments. In terms of net present value, the combination of tax planning and choosing from among several different repayment alternatives can leave university graduates substantially better off financially at the end of the repayment period.
For married taxpayers, there are considerably more complexities in this arena. Depending on the spouses respective incomes, debt levels and occupations, one tax filing status may be desirable over another. While married taxpayers enjoy lower tax liabilities by filing joint returns, they also become subject to higher monthly payments. Conversely, married taxpayers generally pay much more in taxes by filing their returns separately. Nonetheless, depending on their specific circumstances, they may greatly benefit by lowering their monthly payments thereby maximizing the dischargeable amounts of their future outstanding loan balances. Determining the best tax filing strategy in this regard requires a careful discounted cash flow analysis. Since a poorly implemented strategy can produce terrible results, we recommend working with a trained tax specialist to help you navigate through this complicated financial maze.
– Staff